Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Not all banks are bad, claim tiddlers who aim to challenge the giants

Not all banks are bad, claim tiddlers who aim to challenge the high street giants. For example, there’s the Charity Bank which, as its name suggests, is both a registered charity and a fully-authorised bank with depositors protected by the Financial Services Compensation Scheme.

Two decades after the first steps were taken to launch Charity Bank and 10 years after it gained authorisation from the Financial Services Authority, the ‘good guys in a bad business’ remain little-known.

With less than £66m in deposits and having advanced loans of £165m, this is a true tiddler of the banking sector. But Charity Bank points out that more than £105m of these loans have been repaid and its default rate is just 0.5pc.

Nor did it overpay for the expertise to deliver that performance. Unlike bigger rivals such as Barlcays, which has been criticised for paying millions ot Bob Diamond, Charity Bank limits the maximum pay of its high flyers to no more than nine times that of its lowest-paid employees.

Chairman George Blunden, said: “Our ultimate mission is not to maximise profit, but to maximise impact on society. Our work to create social change is what distinguishes us from other banks. For us it is not about negative screening, it is about positive investing – funding projects that improve lives.”

Savers’ rates paid by the bank are not market-beaters. For example, its cash individual savings account (Isa) pays 2.05pc tax-free and its standard savings account pays just 1pc before tax on deposits below £100,000. But it hopes to attract customers who are fed up with other banks.

Mr Blunden said: “In a tempestuous few weeks which have heard Vince Cable describe UK banking as a ‘moral quagmire of almost biblical proportions,’ the contrast in customer satisfaction between the mainstream banks and the ethical alternatives has never been more marked.

“In a recent survey of our customers, 99 per cent said that they would recommend Charity Bank to a friend. A level of satisfaction that is unheard of in high street banks.

“The UK has too long been in the grip of apathy banking, where we let our bankers do what they like with our money. We have grown used to being kept in the dark. In a society where it is more likely that someone will get divorced than change their bank, people are waking up to the need to take action. We have seen new customer numbers treble in the past six months and other ethical banks are telling similar stories.

But it isn’t easy to get authorisation to set up shop in rivalry to established high street banks. Dave Fishwick, a Burnley businessman who has made millions as the biggest minibus supplier in Britain, aims to link savers in his home town earning dismal interest on their deposits with local businesses desperate for cash.

He wants to launch the ‘Bank of Dave’ and says he is already lending £25,000 a week, with hundreds of happy local customers. But it’s not really called Bank of Dave, despite Mr Fishwick’s best efforts. It’s the Burnley Savings & Loans and it will stay that way unless he succeeds in obtaining a banking licence.

For now, it is important that any would-be depositors with Burnley Savings & Loans or ‘Bank of Dave’ understand their money is not protected by the statutory FSCS safety net. So, at least until the regulators extend protection, Charity Bank looks a safer bet for depositors who want to do well by doing good.
• Channel 4’s new series: Bank of Dave starts on July 12 at 9pm. A book to accompany the series is available now (Virgin) £12.99.